Chapter 24, Problem E24.14E

To determine

Concept Introduction

Manufacturing Overhead: Manufacturing overhead refers to indirect costs that are incurred in the factory, other than direct materials costs and direct labor costs. Some of the examples of manufacturing overhead are depreciation on manufacturing plant and equipment, property taxes on plant, plant janitor’s wages etc.

Predetermined Overhead Allocation Rate: A predetermined overhead allocation rate is used to assign the indirect manufacturing overhead costs to the units of production. It is computed by dividing the estimated overhead cost by an estimated quantity of allocation base.

Allocation Base: An allocation base is used to allocate the indirect overhead costs. For example: Direct labor hours, machine hours, direct labor cost etc.

Plant-wide Overhead Allocation Rate: It is a single overhead allocation rate used by a company to assign or allocate all of the indirect manufacturing overhead costs to the units of production.

1.

To Compute: The predetermined overhead allocation rate using machine hours (MHr) as the allocation base.

To determine

2.

To Compute: The allocated overhead cost to the basic model.

To determine

3.

To Compute: The allocated overhead cost to the professional model.